Author: Katherine Ross, David Canellis, Blockworks; Translated by: Baishui, Golden Finance
Are you having fun?
It’s been a while since we last covered Pump.fun or any celebrity memecoins.
As K33 analyst David Zimmerman put it, Solana-based dapps are helping people “mine for gold in the memecoin space” by selling “shovels.”
Pump revenue peaked in July but has declined so far this month. To be fair, though, there’s still a week left in the month.
Source: K33
K33 analyst David Zimmerman wrote: “Pump’s simple idea attracted a large number of users, and the dapp has also seen rapid growth, with cumulative revenue approaching $100 million since its launch, reaching the revenue figures that DeFi teams dream of.”
“At the time of writing, Pump’s 24-hour revenue is $520,000, followed by Solana at $356,000, Ethereum at $336,000, and Aave at $297,000. The platform was founded in January but did not start to gain traction until March. Since then, revenues (both in absolute numbers and trajectory) have been among the most impressive in DeFi history.”
How sustainable is Pump.fun?
Well, this is where things get a little tricky. At first, “a rising tide lifts all boats,” but from then on — along with the pace of releases (as shown below), the landscape has become a bit cannibalistic and competitive. Zimmerman believes this could make it “completely unprofitable for traders” — if it isn’t already.
Source: K33
Since January, 1,829,747 memecoins have been issued.
At the time of the research release yesterday, there were 10,740 tokens issued as of this writing. Of these, only 136 tokens have a market cap above the $69,000 required to enter DEX trading.
There are too many top wallets right now (i.e. users with $100,000 to $1 million+ in the profitable wallet tier ranking, which is only a small portion of wallets) pumping and dumping their own deployed tokens.
“The Pump initially provided a great venue for traders looking to profit from trading newly minted memecoin. Due to the sheer volume of tokens being produced, it is now impossible for users to do so unless they are engaging in nefarious and manipulative on-chain activity,” Zimmerman said.
It’s also worth pointing out that others — like Justin Sun’s Tron — are trying to get a piece of the action by launching their own memecoin deployers. Just last week, Tron launched Sun.pump, which has already created more than 26,000 tokens, according to Dune.
But let’s not pretend that the memecoin craziness is just Solana’s problem.
Last month, L1 and L2 token issuance on Ethereum exceeded 403,000, only slightly higher than the 398,000 on Pump.
Zimmerman said it best: “The problems with the Pump mirror those of crypto as a whole — altcoin saturation, little innovation, and relatively little capital flowing in. In terms of trading, given the surge in altcoins, there simply isn’t enough new capital flowing in to create a wave that lifts all boats.”
“Increasing competition forces us to be more aggressive in profit-taking and more flexible in rotation.”
In fact, there is a joke that may really help you understand this situation:
Source: Looper
Ah, yes.
Not to say that passing the buck isn’t fun, but let’s be clear, we’ve said it once and we’ll say it again: This cycle is different. The available liquidity is different. And that means crypto has to evolve and change the way it approaches certain aspects of the ecosystem.
Zimmerman writes that while the microcap memecoin market may have dried up, there are still plenty of opportunities.
– Katherine Ross Oct 14 '17 at 14:25
Dogecoin started the fire
Memecoins are not a flash in the pan.
Dogecoin has outlasted every cryptocurrency market cycle since its launch in 2013. That’s the equivalent of six bull and bear markets, yet they remain as popular as ever.
Yes, there are hundreds, if not tens of thousands, of pump and dumps every week. Some are successful, but the vast majority are not.
The cheaper networks, including BNB Chain, Solana, Base, and most recently Bitcoin via Ordinals, can be seen as the home for various tokens and memecoins that never succeeded, or if they did, it was only for a short period of time.
There are a lot of memecoins that have actually succeeded, even if it depends on your definition of success. There are currently 18 memecoins with a market cap of $250 million or more, with the lowest of these being roughly the same as more serious projects like Arkham, Dymension, Manta, and 1inch.
Another 180 or so tokens have a market cap of $5 million or more, and their value could be significantly reduced if a significant number of tokens were sold at once.
Still, tracking the top 50 memecoins by market cap over the past seven years shows that they are indeed slowly eating into cryptocurrencies. But they have recently reached a ceiling.
The chart below plots memecoin dominance versus the total cryptocurrency market cap. It does not include all coins. But it does cover about 95% of the total memecoin market cap.
DOGE and SHIB currently account for 75% of the entire memecoin market, so it’s worth splitting up the remainder to spot any trends.
Something to note: Market dominance generally refers to how much of the market is made up of a particular asset — Bitcoin’s dominance is currently 57% because it contributes this amount to the total market capitalization of cryptocurrencies.
In this case, Bitcoin and Ethereum are removed from the calculation. Memecoins, including those that double as native tokens for their own independent networks, are rarely intended to compete with these two cryptocurrencies, so it is more interesting to measure the relative dominance of memecoins compared to the rest of the cryptocurrency market.
Meanwhile, the blue line follows the market dominance of memecoins other than Dogecoin and Shiba Inu.
Note that memecoin dominance has been trending upward since 2021. Elon Musk’s involvement in the cryptocurrency zeitgeist was at its peak at the time, and he was very fond of promoting Dogecoin.
Overall, memecoin dominance excluding Bitcoin and Ethereum is currently at 6.5%. Without DOGE and SHIB, it is closer to 2.65%.
Dominance peaked at nearly 10% in May 2021 and was just below that level at the end of May this year.
Perhaps most tellingly, the blue line reached its all-time high around the same time and has been trending upward ever since, even as the purple line retraced between November 2022 (the FTX crash) and February of this year.
This suggests that newer memecoins, at least those that have survived, are indeed finding solid footing within the broader crypto market.
Crypto is many things, one of which is pure peer-to-peer financial anarchy. This is what has sparked the interest of many newcomers to the space.
If the core of crypto and blockchain — pseudonymity, untraceability, and censorship resistance — has been eroded by waves of regulation over the years, the memecoin market is carrying the torch.
— David Canellis
Impromptu Q&A
Q: Is the memecoin craze over?
One thing that comes out of the data is that memecoin dominance tends to correlate with the broader cryptocurrency market.
There is usually a lag of a few months, but if a cryptocurrency goes up, memecoin’s market share will usually go up as well.
So if crypto takes a long breather from now on, the memecoin moment may be over (for now).
Obviously, memecoin launchpads will persist throughout market cycles, just like memecoin itself.
The emergence of ETFs, the rebirth of prediction markets, and the popularity of memecoin launchpads are defining this cycle, and it’s not the worst thing for the space. At least these are bringing in some serious revenue.
PS: Yesterday, I wrote that Franklin Templeton uses Ethereum for its money market fund. As a reader pointed out via email last night, it actually uses Stellar and Polygon. Thanks!
— David Canellis
I think it's an outdated game.
It’s undoubtedly interesting and offers plenty of opportunity, but it’s risky and right now, as Zimmerman wrote in a note yesterday, it’s becoming increasingly difficult for traders to profit.
Does this mean that crypto can’t be fun anymore? Of course not. There will be other games or trends that allow people to have fun while making money, that’s the nature of some parts of crypto. If it weren’t for the memecoin craze, I’m sure it would return soon in another form.
But for now, (micro)memecoin games are not.
In a way, this is a good thing. Cryptocurrency is evolving and we have to change with it. I can understand that some people may not want to accept this change.
As for me, I'm always excited about what's going to happen next. So let's get to the next chapter.
—— Katherine Ross
